Is DeFi Useful, Will it Survive, and Could it Be a Safe Investment in 2022?

10 min read

If, like me, you wonder about where DeFi platforms will go and what the ecosystem might look like in the future, give this article by Rasheed a thorough read. He gives a decent history of DeFi, its potential and its shortcomings.  He is definitely thought provoking and worth following. He starts with “Cambrian explosion” and “primordial soup”, so it’s gotta be good!

Source: Defi Llama
Source: Defi Llama

Part 1: The Dawn of DeFi

The perils of early crypto trading

Source: Coingecko
Source: WIRED,, FT, Creative Commons

DeFi “1.0”, an abridged history

Capital inefficiency and impermanent loss: The rise of the token

Source: DeFi Llama
  1. DeFi is very concentrated: The top 7 protocols account for just under half of all TVL. The top 50 protocols account for 90%.
  2. DeFi is mostly explained by the four trading use cases above: Over 90% of the top 50 are related to facilitating trading.
  3. True TVL on DeFi is overstated: Overlap abounds, with, for example, Convex (#4) and Yearn (#14) sitting on Curve (#1).
  4. Ethereum is barely holding a 50% market share, down from near 100% a year ago. The rise of new chains means that the same infrastructure has to be replicated many times: each chain needs a DEX or three (including one for stables), a borrowing/lending protocol, and a yield aggregator. Avalanche, for example, has Aave and Benqi as top borrower/lenders, Curve, Platypus and Trader Joe as top AMMs, and Yield Yak to farm yields.

DeFi 1.0 after the hype

Source: Coingecko
Source: Vesper, Coingecko, DeFi Llama.

Centralization is winning crypto

Source: The Block
Source: @rchen8
Source: Coingecko
Source: Coingecko

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